Wall Street Hovers Near Record Highs as Rate-Cut Hopes Grow and Earnings Deliver Mixed Signals

BY Rosemary

U.S. stocks drifted near record levels on Tuesday as investors weighed a mixed batch of corporate earnings alongside fresh economic data that reinforced expectations the Federal Reserve could begin cutting interest rates later this year. Gains in some high-profile companies, including Hasbro and DuPont, were offset by declines in others such as Coca-Cola and S&P Global, leaving the broader market largely treading water.

The S&P 500 edged down 0.1% after swinging between modest gains and losses for much of the session, briefly sitting just above its all-time high set earlier this month. The Dow Jones Industrial Average added about 120 points, or 0.3%, pushing further into record territory as trading moved toward the close. The Nasdaq composite lagged, slipping 0.3% amid weakness in several large technology and data-related names.

The bond market showed a clearer reaction to the day’s economic news. Treasury yields fell after a report showed U.S. retailers generated less revenue at the end of last year than economists had forecast. Consumer spending in December was essentially flat compared with November, underscoring a potential slowdown in household demand after months of resilience.

Because consumer spending accounts for the largest share of U.S. economic activity, the weaker-than-expected data raised concerns that momentum may be fading. The report also arrived ahead of two closely watched releases later in the week: Wednesday’s update on the labor market and Friday’s inflation data, both of which could influence the Federal Reserve’s next policy moves.

Taken together, the data will help shape the central bank’s outlook on interest rates. The Fed has paused its rate cuts as it waits for clearer evidence that inflation is cooling sustainably. Persistently high price pressures could keep policymakers on hold longer than investors would like, while a softening job market could prompt a quicker return to rate reductions.

One of the main forces keeping the U.S. stock market near record highs has been the belief that the Fed will eventually lower borrowing costs later this year. Lower rates can stimulate economic activity and support corporate profits, though they also carry the risk of reigniting inflation if enacted too soon.

After Tuesday’s retail sales report, traders increased their bets that the Fed could cut interest rates three times or more in 2026, according to futures data tracked by CME Group. Even so, expectations remain divided, with many investors still viewing two cuts as the most likely outcome.

Reflecting those shifting expectations, the yield on the 10-year Treasury note fell to about 4.14%, down from 4.22% late Monday, easing pressure on interest-rate-sensitive stocks.

On the corporate front, earnings reports were a key driver of individual stock moves. Coca-Cola shares fell 1.5% after the beverage giant reported quarterly revenue growth that missed analysts’ expectations. The company also offered a forecast for an important underlying growth metric for the coming year that came in below some Wall Street estimates.

S&P Global tumbled 9.3% after issuing a profit outlook for the year ahead that disappointed investors. The company, best known for its widely followed stock indexes and financial data services, has been facing concerns that competitors using artificial intelligence could erode its customer base. Its shares entered the day already down about 15% for the year.

In contrast, Hasbro surged 7.4% after delivering stronger-than-expected profit and revenue for the latest quarter. The toymaker pointed to solid demand for its “Magic: The Gathering” franchise and announced plans to return up to $1 billion to shareholders through stock buybacks.

DuPont also advanced sharply, climbing 4.4% after posting quarterly results that exceeded analysts’ forecasts. The chemical company further boosted sentiment by issuing a profit outlook for 2026 that topped expectations.

Outside the earnings calendar, Warner Bros. Discovery gained 2.6% following news that Paramount had sweetened its offer to acquire the media company. Paramount said it would increase its $30-per-share bid by 25 cents for each quarter the deal remains unfinished beyond the end of this year, a move intended to signal confidence in securing regulatory approval. The company also said it would contribute $2.8 billion to help Warner Bros. Discovery exit its existing buyout agreement with Netflix. Shares of Paramount Skydance rose 1.2%, while Netflix added 1.4%.

International markets were mostly higher. In Asia, Japan’s Nikkei 225 jumped 2.3% to another record, extending gains for a second straight session as investors welcomed expectations that a newly elected parliament would enable the prime minister to advance tax cuts and other pro-growth policies. Other Asian markets posted more modest gains, while European stock indexes finished mixed.

Overall, investors remain cautiously optimistic, balancing hopes for easier monetary policy against signs that economic growth may be losing some steam. With key labor and inflation data still ahead, markets are likely to remain sensitive to any clues about the Fed’s next steps.